Amazon has bought several mobile game development studios in the past year, hinting that the rumors may have some validity to them.

As for the future of "Killer Instinct," Phil Spencer, corporate vice president of Microsoft Studios, responded to fan questions on Twitter by saying development will continue with Microsoft's own internal team. Rare, creator of the franchise, is also still owned by Microsoft, though it's currently working on "Kinect Sports Rivals" and undisclosed games.

@Nicodemus9 Our internal KI team is still here and franchise is in good hands. We had a plan in place for this transition.

The phrasing of Spencer's tweet implies Microsoft was given advance notice of the sale, which could mean it's already been working on its transition plan for some time. Microsoft had to make a similar transition on its PC game "Age of Empires Online," which began development at Robot Entertainment and later moved to Gas Powered Games.